ISTANBUL May 22 Turkey's bid to create a
regional power market is moving forward with preparations to add
electricity futures and derivatives trading yet the appeal of
tapping the country's rapid growth is tempered by caution about
how the market will work.
"Turkey has the potential to develop into a regional energy
trading hub which could even provide a bridge with Europe," said
Tobias Paulun, member of the exchange management board at
Germany's European Energy Exchange (EEX).
"But the questions now are about how to realise a market and
how to attract liquidity," Paulun said.
EEX last year signed a memorandum of understanding with
Turkish power transmission company TEIAS.
European utilities such as Norway's Statkraft
and Germany's RWE have also set up trading teams in
Others who have expressed interest in the market include
German utility E.ON which has recent acquired 50
percent of Sabanci Holding's Enerjisa as well as big
Turkish investors like Aksa Enerji, in which Goldman
Sachs holds a stake.
"The most important thing that is missing is a reference
price and if there will be a forward price for 2014-2015. This
is what you look for from an investor point of view," Bakatjan
Sandalkhan, vice president, RWE Turkey, told the EMART Turkey
conference in Istanbul.
"Do we have a mechanism to set the price for 2014-2015 and
can we trust this mechanism? At the moment we can't talk about a
trading market, we can only talk about a market where you only
buy and sell power," he added.
Set to overtake Britain within a decade as Europe's third
biggest electricity consumer, Turkey is what investors have been
waiting for as Europe's economic crisis has dried up its power
demand, forcing utilities and big banks to scale back on power
and gas trading.
Turkey's power market looks to be the only one in Europe
promising returns, after electricity consumption rose by 5
percent to 242 billion kilowatt hours (kWh) in 2012 and with
energy demand growth forecasts that are second only to those of
A year earlier, Turkey's energy consumption grew 9.2 percent
(to 118.8 million tonnes of oil equivalent), contrasting with a
0.5 percent drop on average across Europe and Eurasia, BP's
annual statistical review showed.
"There is a lot happening in Turkey, especially if you
compare its growth with that of the rest of south-east Europe,"
said Claus Urbanke, head of new markets at Statkraft.
Statkraft, which is building 600 megawatts of hydropower
capacity in Turkey, set up a trading desk in Istanbul in April
last year and is currently recruiting additional staff.
The launch of an energy exchange by October will introduce
electricity futures trading and is aimed at transforming the
existing PMUM spot power trading platform into a more
transparent and free market.
PMUM has little liquidity and is therefore often bypassed by
private power traders who opt for bilateral contracts to sell or
And after a decade of privatising energy assets, the Turkish
government still controls almost half of the power-generation
It holds a 49 percent stake in Turkey's main stock exchange
Borsa Istanbul, which is likely to be the biggest
shareholder in the planned power exchange.
"The state will definitely hold a stake because when the
market is tight, we see irrational prices in spot trading. So in
order to balance that, we need to have the state stake," an
energy official said.
To do that it will hold onto some of the hydro power plants
which it sees as strategic assets.
"Some hydro plants will not be privatised and with the
production here, the prices will be balanced when necessary,"
the official said.
Turkey has completed the privatisation of 20 power
distribution grids and no longer owns any. It has completed four
power generation tenders and is eyeing more.
(Additional reporting by Orhan Coskun in Ankara; writing by
Humeyra Pamuk; editing by Jason Neely)